FERC is composed of five commissioners who are nominated by the U.S. President and confirmed by the U.S. Senate. There may be no more than three commissioners of one political party serving on the commission at any given time.[1]

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The Federal Power Commission (FPC), which preceded FERC, was established by Congress in 1920 to allow cabinet members to coordinate federal hydropower development.

In 1935, the FPC was transformed into an independent regulatory agency with five members nominated by the President and confirmed by the Senate. The FPC was authorized to regulate both hydropower and interstate electricity.

In 1938, the Natural Gas Act gave FPC jurisdiction over interstate natural gas pipelines and wholesale sales. In 1942, this jurisdiction was expanded to cover the licensing of more natural gas facilities. In 1954, the Supreme Court decision in Phillips Petroleum Co. v. Wisconsin extended FPC jurisdiction over all wellhead sales of natural gas in interstate commerce.

In response to the 1973 oil crisis, Congress passed the Department of Energy Organization Act in 1977, to consolidate various energy-related agencies into a Department of Energy. Congress insisted that a separate independent regulatory body be retained, and the FPC was renamed the Federal Energy Regulatory Commission (FERC), preserving its independent status within the Department.[2] FERC was also given added responsibility to hear appeals of DOE oil price control determinations and to conduct all "on the record" hearings for DOE.[3] As a result, DOE does not have any administrative law judges. As a further protection, when the Department of Energy proposes a rule, it must refer the proposal to FERC, and FERC can take over the proceeding if FERC determines that the rulemaking "may significantly affect" matters in its jurisdiction.[4] The DOE Act also transferred the regulation of interstate oil pipelines from the Interstate Commerce Commission to FERC.[5] However, the FERC lost some jurisdiction over the imports and exports of gas and electricity.

In 1978, FERC was given additional responsibilities for harmonizing the regulation of wellhead gas sales in both the intrastate and interstate markets. FERC also administered a program to foster new cogeneration and small power production under the Public Utilities Regulatory Policy Act of 1978, which was passed as part of the National Energy Act of 1978. The National Energy Act included the Natural Gas Policy Act, which reduced the scope of federal price regulation, to bring greater competition to both the natural gas and electric industry.

In 1989, Congress ended federal regulation of wellhead natural gas prices, with the passage of the Natural Gas Wellhead Decontrol Act of 1989.[6]

The Energy Policy Act of 2005 expanded FERC's authority to protect the reliability and cybersecurity of the bulk power system through the establishment and enforcement of mandatory standards, as well as greatly expanding FERC authority to impose civil penalties on entities that manipulate the electricity and natural gas markets. The Energy Policy Act of 2005 gave FERC additional responsibilities as outlined in FERC's top priorities and updated strategic plan.

FERC is an independent regulatory agency within the United States Department of Energy. The President and Congress do not generally review FERC decisions, but the decisions are reviewable by the federal courts. FERC is self-funding, in that Congress sets its budget through annual and supplemental appropriations and FERC is authorized to raise revenue to reimburse the United States Treasury for its appropriations, through annual charges to the natural gas, oil, and electric industries it regulates.[7]

FERC is independent of the Department of Energy because FERC activities "shall not be subject to further view by the Secretary [of Energy] or any officer or employee of the Department".[8] The Department of Energy can, however, participate in FERC proceedings as a third party.

FERC is composed of up to five commissioners who are appointed by the President and confirmed by the Senate. The President appoints one of the commissioners to be the chairman of FERC, the administrative head of the agency. FERC is a bipartisan body; no more than three commissioners may be of the same political party.

FERC investigated the alleged manipulation of electricity market by Enron and other energy companies, and their role in the California electricity crisis. FERC has collected more than $6.3 billion from California electric market participants through settlements. Since passage of the Energy Policy Act of 2005, FERC has imposed, through settlements and orders, more than $1 billion in civil penalties and disgorgement of unjust profits to address violations of its anti-market manipulation and other rules.

FERC regulates approximately 1,600 hydroelectric projects in the U.S. It is largely responsible for permitting construction of a large network of interstate natural gas pipelines. FERC also works closely with the United States Coast Guard to review the safety, security, and environmental impacts of proposed LNG terminals and associated shipping.

FERC has been subject to criticism and increasing acts of activism by people from communities affected by Commission decisions approving pipeline and related projects.[9] They contend that FERC “blithely greenlights too many pipelines, export terminals and other gas infrastructure”[10] and that FERC’s structure in which it recovers its annual operating costs directly from the entities it regulates creates bias in favor of the issuance of pipeline certificates.[11] Some of these critics have disrupted several regular open meetings of the Commission,[12] and they staged two, week-long blockades of the Commission’s headquarters in Washington, D.C., to make their points.[13] "Pipelines are facing unprecedented opposition," Commissioner LaFleur remarked to the National Press Club in a 2015 speech. "We have a situation here.”[14]

Yet, FERC’s decisions in these cases continue to be upheld by the courts. In a July 1, 2014, decision, No Gas Pipeline v. Federal Energy Regulatory Commission, the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) said that pipeline applicants are not likely to pursue many certificates that are hopeless. “The fact that they generally succeed in choosing to expend their resources on applications that serve their own financial interests does not mean that an agency which recognizes merit in such applications is biased,” the court said.[15] Others have directly disputed FERC’s critics by pointing out that “FERC is a creature of law. It follows a careful administrative path to regulate only a portion of natural gas such as interstate pipelines and LNG import and export terminals. That regulation includes extensive environmental review, driven by many federal laws enacted by Congress, signed by the president, and reviewed and upheld by the U.S. Supreme Court. If the agency were to adopt the path [suggested by these critics], FERC’s decisions would routinely be overturned by the federal courts.”[16]

The United States District Court for the District of Columbia also dismissed a case involving allegations of structural bias on the part of FERC. The plaintiffs contended that the Omnibus Budget Act of 1986 funding mechanism requires the Commission to recover its budget through proportional charges on regulated entities, therefore making FERC biased in favor of the industry from which it gets its funding. But in an order issued March 22, 2017, the court said the plain language of the statute indicates that FERC does not have control over its own budget. “The Commission’s budget cannot be increased by approving pipelines; rather, [the statute] requires the Commission to make adjustments to ‘eliminate any overrecovery or underrecovery.’ If Plaintiffs are unhappy with Congress’s chosen appropriations to the Commission…, Plaintiffs’ recourse lies with their legislative representatives.”[17] However, the D.C. Circuit has ruled against Commission procedures, stating that in one case FERC failed to consider the cumulative environmental impact of four projects that had been separately proposed by the same pipeline. The D.C. Circuit held that the projects were not financially independent and were “a single pipeline” that was “linear and physically interdependent,” so the cumulative environmental impacts should have been considered concurrently.[18] Subsequently, in a separate decision, the D.C. Circuit clarified that the “critical” factor was that all of the pipeline’s projects were either under construction or pending before FERC for environmental review at the same time.[19] This guidance has allowed FERC to address additional claims of improper segmentation.[20]

FERC's leaders have stressed many times since the onset of the increased activism that the proper way to oppose a proposed new infrastructure project is by participating in the related proceeding by submitting comments and participating in public comment sessions, site visits and scoping meetings. If someone does not like FERC's decision on a matter and/or believes the agency acted improperly, the proper way to protest is to first seek rehearing by the Commission, and then if that fails, to take the matter to court. FERC decisions can be appealed up to the Supreme Court. And should the individual or group still be dissatisfied, they may petition Congress to rectify the problem.”[21]